Shares of Chinese independent cloud service provider, Kingsoft Cloud Holdings Limited (NASDAQ: KC), gained almost 12% on June 8 after it delivered an impressive first-quarter beat despite the ongoing COVID-19 situation in China.
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Q1 Beat
Notably, the company reported an adjusted loss of $0.02 per share, significantly better than the Street’s estimated loss of $0.32.
Furthermore, revenue jumped 20% year-over-year to $342.9 million in the quarter and was also ahead of the $324.9 million consensus.
The robust revenue growth was driven by a whopping 88.7% increase in revenues from enterprise cloud services, offsetting a slight decline in public cloud services revenues.
Outlook
Based on the current macro scenario, management updated financial guidance for Q2FY2022.
The company forecasts total revenues to be in the range of RMB2 billion to RMB2.2 billion, implying year-over-year growth of -8.0% to 1.2%.
Adjusted gross margin is projected to be higher in the second quarter versus the first quarter.
Most importantly, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margins are expected to breakeven in the fourth quarter of 2022.
CEO’s Comments
Kingsoft Cloud CEO, Yulin Wang, commented, “Looking ahead, while uncertainty remains in the outlook, we will continue to focus on our core cloud services, create value for our customers, and facilitate the digitalization of our expanding customer base.”
Wall Street’s Take
Overall, the stock has a Hold consensus rating based on one Buy, one Hold and one Sell. At the time of writing, the average Kingsoft Cloud price target was $6.67, which implies 20.4% upside potential to current levels.
Conclusion
Shares of Kingsoft Cloud have lost over 85% over the past year. The quarterly results significantly exceeded expectations, which could mean that perhaps the worst is over for Kingsoft Cloud, especially with the recently announced easing of the regulatory pressure on the Chinese tech and internet sectors.
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